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Intellectual capital: extended VAIC model and building of a new
HCE concept: the case of Padang Restaurant
Indonesia
Hanif Hanif*, Abdulah Rakhman & Muhammad Nurkholis Institut
Bisnis dan Informatika Kwik Kian Gie
Jl. Yos Sudarso Kav 87, 14350, Jakarta, Indonesia Email:
[email protected]
Kashan Pirzada
Tunku Puteri Intan Safinaz School of Accountancy Universiti
Utara Malaysia, Kedah, Malaysia
[email protected]
Abstract
The objectives of this paper are (1) building a Value-Added
Spiritual Capital (VASC) model which is an extended VAIC model; (2)
Building a New Concept of Human Capital Efficiency. The paper
employs an interpretive paradigm by reinterpreting the existing
text about the intellectual capital concept and synergizing it with
value added of accounting for Mato -based profit-sharing system.
This study produced an extended VAIC model, namely Value Added
Spiritual Capital (VASC). Three development results are firstly,
adding a new element of intellectual capital, namely the
organizational spiritual capital. Secondly, measuring the role of
each intellectual capital (IC) element to create value added.
Thirdly, conducting an extended measurement of Human Capital
Efficiency (EHCE), which is represented by Value Added Per Mato
(VAPM) as the proxy to result EHCE model.
Keywords: Model VASC, Mato System, extended human capital
ffficiency (EHCE), value added per mato (VAPM)
Introduction
Value added is a tool to measure financial performance
achievement of a company. A company is established to create value
added (VA). Pulic (2004) formulated VA = OUT – IN, in which value
added is created by tangible assets and intangible assets of the
company (Bontis et al, 2000; Pulic, 2000, 2004; Choong, 2008;
Nazari & Herremans, 2007). IC reflects intangible assets (IA)
of a company (Choong, 2008). IC is formed from four elements: Human
Capital (HC), Structural Capital (SC), Customer Capital (CC), and
Property Rights Capital (PRC) (Choong, 2008). Yet, Pulic (2004)
noted that there were only two elements of the IC, that are HC and
SC. All elements besides HC, is classified into SC, therefore IC is
formulated as IC = HC + SC (Pulic, 2004). It means that Choong
(2008) makes CC and PRC distinct elements inseparable from SC.
VAICTM is efficiency measure of Intellectual Capital (IC) to create
VA or performance (Pulic, 2000, 2004). Indeed, significant
weaknesses hav been investigated in the formula composition. It
basically reveals inconsistent argumentation built to create the
VAICTM measurement. The argumentation of creating VAICTM is based
on the company balance sheet, which is a conventional accounting
output: a sum of Human Capital Efficiency (HCE), Structural Capital
Efficiency (SCE), and Capital Employee Efficiency (CEE). Pulic’s
argumentation in fact suggested that VAICTM is required due to
having the conventional accounting limitedly be able to serve as a
means of measure to capture “current business” condition (Pulic,
2000, 2004).
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“Current business” is a present condition of a business that
exists in a very dynamic or highly changing environment so that how
the “current business” is formed may not be typically along
“conventional business” lines that gives rise to “conventional
accounting”. Pulic’s claim to agree with VAICTM as a compatible
tool to measure financial performance of “current business” remains
inappropriate since the formula of VAICTM, itself stems from
conventional accounting, in other words, VAICTM is indeed
considered as a conventional accounting measuring tool (Pulic,
2000, 2004). This paper aimed to generate VAICTM on the basis of
“current business”. In order to formulate a measurement with
“current business” feature, VAICTM needs, developing – it should
not only involve a financial accounting element, but also a more
appropriate approach to measure performance existing in a rapidly
changing business environment. The development addressed in this
study is focused on exploring SC element, which is elaborated
in-depth and in details. In addition, an extended Human Capital
Efficiency (EHCE) coefficient is revealed. Pulic (2004) introduced
a formula of HCE = VA/HC. If the value of VA/HC is 3, it will mean
that each 1 USD of company load is worth value added of 3 USD. This
is a very useful information for management; for instance, if
VA/HC=3, it means that each 1 USD of company load will be worth
value added of 3 USD. The result of this measurement is useful for
completely noticing human resource efficiency. Nevertheless, the
ratio derived fails to investigate each employee’s contribution to
value added creation. The information is also greatly significant
for internal interest of the company management in order to fairly
determine reward and punishment. Development of HC measurement in
order to refine human resource management should be conducted. This
is in line with Pulic and Choong studies considering the importance
of one heading step to redefine employee position with the
intellectual capital as human capital becomes a crucial element of
it (Pulic (2000, 2004; Choong (2008). Thus, there are two sorts of
development to address in this paper: firstly, extended VAICTM and
secondly, extended HCE. Literature Review Intellectual Capital
Choong (2008) noted that several definitions of IC (IA) have been
revealed by experts and most of them generally stated that IC (IA)
was a non-monetary set with the absence of physical substance, but
had a value and generated benefit in the future. Defining IC or IA
should apparently begin with defining the asset itself. IA (IC) has
been regarded as the most important resource companies have
nowadays; unfortunately, most of them are not able to define what
IA truly means. A couple of terms have been employed to describe IC
(IA). One researcher defined IC as a difference between the market
value of a company and its book value, in the meantime, the other
researchers introduced "Goodwill”, a difference between entity
market value and book value, which is known as “unreal asset”
(Choong, 2008). In accounting, “goodwill” is, however recognized
when a purchase transaction upon a company takes place and the
transaction costs higher than the book value. Goodwill is “an
unreal asset” of “intellectual capital”. Conversely, Choong (2008)
did not seem to agree with the idea of having IC or IA represented
by goodwill since this term covers a wide range area of discussion.
In addition, the researcher has not completely explained what it
means yet. Kaufmann and Schneider (2004) elaborated well a bunch of
terms and definitions for each type of IA. Some terms used by
researchers i.e. “unreal asset”, unreal resources”, or
“intellectual capital”, “intellectual wealth”, “intellectual
knowledge”, and “material values”, have more or less a similar
meaning. On the other hand
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IC is concisely elaborated upon as an unreal asset: an asset
that cannot be seen and includes such varied activities as
technology, consumer trust, brand image, company culture, and
managerial skills. Choong (2008) revealed that the perspectives of
IASB and IAS 38 accounting policies define IA to be identified as a
non-monetary asset without physical substance it owns. IA is used
in the production or supply of goods and service, for rent, or for
administrative matters. IAS 38 defines IA to cover expenses for
advertisement, training, research and development. There is a wide
range of activities that can be treated as IAS, but it is expected
that all of them will benefit in the future (cash flow). Such
activities include advertising (marketing), distribution, research
and development, human resource empowerment, and values of brand,
copyrights, agreement for zero completion, franchise, future
interest, license, operating rights, patent, record holder,
confidential process, trademark, and trade name. Intellectual
Capital Elements Choong (2008) suggested four intellectual capital
elements: Human Capital (HC), Structural Capital (SC), Customer
Capital (CC), Property Rights Capital (PRC). Meanwhile, (Pulic
(2000, 2004) simplified them into two elements of Human Capital
(HC), and Structural Capital (SC). The red tape of both researchers
is that IC can be simplified or in return, developed. In the
“current business” context as explored by Pulic (2000, 2004) it is
possible that the IC be more developed not only into two or four
elements but also more varied elements. Owing to the fact that the
present business condition of 2019 is much different from that by
the time VAICTM was formulated, it is required that improvement and
development of VAICTM go along with the development of what Pulic
(2004) calls “current business”. For instance, SC element includes
one significant variable of “current business” of 2019 that is the
phenomenon of industrial revolution 4.0. Intellectual Capital
Measurement: VAIC Bontis et al., (2000) and Choong (2008) stated
that IC comprises four elements: Human Capital (HC), Structural
Capital (SC), Customer Capital (CC), and Intellectual Property
Capital (IPC). Human Capital involves knowledge and competence,
Structural Capital involves development and technology, and
Intellectual Capital involves brands and rights. The whole
Intellectual Capital measurement is the sum of the total elements.
Pulic (2004) pointed out that to figure out IC efficiency, value
added was measured to serve as an indicator to notice success of
business. Value added is formulated as VA = OUT-IN, where OUT is
total revenues and IN is total expenses (exclusively wages and
salaries expenses), or it can also be formulated as VA = OP + EC +
D + A, where OP is operating income, EC is employee cost, D is
depreciation, and A is amortization. Pulic (2004) formulated
efficiency of each IC element; for example, efficiency of human
capital is calculated with VA/HC, where HC is total salaries and
wages. Structural Capital is calculated with SC = VA-HC, and
Structural Capital Efficiency (SCE) is calculated with SCE = SC/VA.
Thus, Intellectual Capital Efficiency (ICE) can be calculated with
ICE = HCE + SCE. Next, Value Added Intellectual Efficiency (VAICTM)
is formulated as VAICTM= ICE + CEE, where ICE IC efficiency (IA)
and CEE is efficiency level of real asset (Pulic, 2004).
Organizational Spirituality VAICTM as an Element
Pros and cons as to whether or not organizational spirituality
exists has been addressed by Neal and Biberman (2003) by
questioning: Does organizational spirituality exist? Is
spirituality of The Highest Thing that goes far beyond human
capability necessary? Additionally, can it be measured? Neck and
Milliman (1994) claimed that the central aspect of spirituality
involves what one’s job means, what the employee mostly achieves
more and more in a company.
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Further, one perspective of a philosopher proves that a job is
likely meant to be one way to most deeply experience God’s presence
in this world. So, the next question will be like: What does
spirituality mean at work? How can working be a spiritual
experience for members of the organization? Working can apparently
be a spiritual experience and it does not depend on how one sees
what the work is like. One’s attitude toward his or her work
becomes the main factor of spiritual process. Therefore, it is
necessary to discuss the meaning of spirituality in a business
organization and to suggest how the spirituality affects employees’
performance in an organization. Secondly, we will discuss how a new
theory of leadership and independent leadership perspective (TSL)
can allow employees to affect or lead themselves in order to
experience more spirituality at work (Neck & Milliman, 1994).
There has been a tendency of the sharp increase in spirituality at
work. One perspective said that when they have been advanced in
technology and communication, people of a community seem to be more
passionate with spiritual matters not only in their personal lives
but also in their works where they spend most of their time.
Organizational spirituality is a more holistic approach to see
organizational life in which people are inherently forced to search
for the meaning and goal of all aspects of life. It obviously
includes the meaning of one’s job. Neal and Biberman (2003) stated
that spiritual capital was defined in words as an asset, either
real of unreal that comes from the spirit of the managers,
employees, staff, and organization volunteers, and all of the
things having influence upon the spiritual condition of all members
in the organization. Learning from these spiritual sources, it is
argued will not only help organizations achieve business objectives
but allow human beings to flourish within organisations (Porth et
al., 1999). Research Methodology
An interpretive method was employed in the research paradigm by
reinterpreting the text of intellectual capital which is next
integrated with the text of business organization concept using a
Mato-based profit-sharing system. Research focus includes two focal
points. Firstly, it is the development of VAICTM by integrating
organizational spirituality element and extended Human Capital
Efficiency (EHCE), which is a development of HCE. Secondly, it is
extended Human Capital Efficiency (EHCE) by integrating existing
HCE concepts with Mato (point)-based employee management. Every
employee no matter what his or her position is in the company will
have the contribution measured proportionally toward company’s
value added creation. It is necessary to consider that the high or
low score each employee has does not rely on merely the
occupation/position; instead, it depends on the contribution one
makes to create the value added (Pirzada, 2016). The load of the
contribution is measured with the Mato system (Hanif et al., 2018,
2019). The internal management having the best knowledge of the
company’s business process is in charge of figuring out each
employee’s contribution. The roles of management accountants and
human resource manager are supposed to be executed in this stage.
This will explore energy to identify, to evaluate, and to measure
the contribution value added creation.
Results
Composing the Concept of Value Added Spiritual Capital as an
Extended VAIC Model
Value Added Spiritual Capital (VASC) is a concept which is
created from an extended VAIC model. This concept is created by
adding one significant element embedded in the VAICTM concept that
is Spiritual Capital (SC). Composing the Value Added Spiritual
Capital (VASC) has been crystallization of the Author’s reflection
while studying the business process occurring in a Padang
restaurant management located in Jakarta-Indonesia (Hanif et al.,
2015; Hanif, 2015a; Hanif, 2015b ; Hanif, 2017; Hanif et al., 2018;
Hanif et al., 2019). The
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measurement of a company’s financial performance is found to be
somewhat unique since it applies VA on the basis of Mato profit
sharing system accounting. Hanif et al (2015) explore the practice
of Mato-based profit-sharing system, taking place in the Padang
restaurant management situated in Jakarta, Indonesia is using the
VA concept for measuring financial performance. VA of the Padang
restaurant version is illustrated in Exhibit 1.
Source: Hanif et al (2015)
This paper aims to develop the measurement of Valued Added
Intellectual Capital by synergizing the existing VAICTM concept
(conventional) with the IC/IA concept using Mato-based
profit-sharing system applied in Padang Restaurant management. This
is meant to result a more comprehensive VAICTM measurement than
that of the former VAICTM concept. The synergy will result Value
Added Spiritual Capital Coefficient (VASCC). As revealed by Pulic
(2000, 2004), Bontis (1998), Bontis et al (2000) and Choong (2008),
it is noted that the VA is derived from the difference between
total revenues (symbolized with OUT) and total expenses, excluding
“salary and wages expenses” & depreciation (symbolized with
IN), having the formula of VA = OUT – IN. This conventional formula
of VA substantially resembles the VA concept using Mato-based
profit-sharing system as illustrated in Exhibit 1. The distinction
nevertheless lies in the development of VA creating elements, which
are classified into one element of SC in conventional VA. One
distinguished feature of the VA using Mato-based profit-sharing
system is that it has an organizational spirituality element in its
creating process, and the so-named organizational spiritual
capital. Another striking distinction is that all VA created from
Mato-based profit-sharing system is measured and calculated
periodically (usually every 100-working day), and then divided to
all stakeholders that comprise: (1) eight beneficiaries of Zakat
(Charity); (2) investors; (3) managers and brand owners, and (4)
all employees. Originating from this Mato-based profit-sharing
system, further is developed (extended) measurement of IC/IA
element proportion to create VA. VASC: Synergy of Conventional VA
with VA Mato-Based Profit-Sharing System
Pulic (2000, 2004) and Bontis et al (2000) stated that the VA
was created by the Intellectual Capital (IC) or intangible assets
and tangible assets the company owns. How IC or IA contribute to
the creation of the VA may be hard to measure. Pulic (2000, 2004)
and Bontis et al (2000) noted that IC element included: Human
Capital (HC), Structural Capital (SC), and Capital Employee (CE).
Pulic (2000, 2004) specifically also pointed out that value
added
Resources:
Sales X
Reduced: Operational Expenses, not include Salaries and Wages
Expenses & Depretiaton X -
Value Added (Profit), prepared to distribute X
Distributed to:
Zakat (Charity) X
"Depretiation" Distributed to Investors X
Taxes X
Profit sharing Distributed to Investors X
Profit sharing Distributed to Management & Brand Owner X
Profit sharing Distributed to Employees X
Retained Earning X + X
Residual 0
===
Exhibit 1. Value Added Statement Based on Mato System at Padang
Restaurant in Jakarta Indonesia
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intellectual coefficient (VAICTM) is the sum of intangible and
tangible assets of the company which is formulated as follows:
VAICTM = HCE + SCE + CEE Where, Intellectual Capital Efficiency
(ICE) refers to intangible assets, consisting of two elements,
namely Human Capital Efficiency (HCE) and Structural Capital
Efficiency (SCE) whilst CEE refers to Tangible Assets (TA). The
following, Pulic (2000, 2004) formulated HCE, SCE, and CEE as
follows: HCE = VA/ HC SC = VA-HC SCE = SC/VA CEE = VA/CA Based on
the above mentioned, the concept of the VA using Mato-based
profit-sharing system is naturally equal to that of conventional.
The differences are signified as follows: (1) IC (IA) creating
elements do exist; (2) VA’s of Mato-based profit-sharing system is
attempting to measure the proportion of VA creating elements, in
which conventional, VA does not apply; (3) VA distribution to
stakeholders as a consequence of point number 2 should meet the
proportion. All elements, creating VA are classified into two in
conventional VA. They are HC element, and Structural Capital (SC)
element which consists of element besides HC (Pulic, 2000, 2004;
Bontis et al (2000). Choong (2008) was developing VA element
stemming from SC, which is divided into three: SC itself, Customer
Capital (CC) and Property Rights Capital (PRC). Choong (2008)
considered CC and PRC being classified into its own group and not
belonging to SC since CC and PRC have a determining role that can
be identified and measured. Yet, by reflecting VA practice in the
business process of Mato-based profit-sharing system, the Author
investigates another significant element in IC (IA) that creates VA
namely organizational spirituality element, the so-called
organizational spiritual capital. Why does it become essential? In
the Mato-based profit-sharing system management, it is believed
that wealth or profit or value added is generated due to the
blessing of God for all the ease. The prayer and generosity God
give in the wealth is an unlimited resource for creating VA. It is
however not explicitly stated that this spiritual element does
exist in the context of conventional VA. What seems to take into
account is only the VA elements besides HC, which all are
classified into SC (Pulic, 2000, 2004). Similarly, Choong added
that IC (IA) is created from HC, SC, CC, and PRC. Thus, the
spiritual capital elements are found in the concept VA with Mato
system. Organizational Spiritual Capital (OSPC) as IC (IA) element,
creating VA, began from the business practice of Padang Restaurant
that initially applies reduction as much as 2.5% off the created VA
on the “zakat (charity)” (See Exhibit 1). “Zakat (charity)”is an
obligation of a Muslim to spare his or her portion upon the
increase of the wealth that one business entity gains, or one
person earns. This is also convinced by the idea that the VA or
wealth in the religious term cannot be separated from prayer and
generosity of God which remain limitless. SPC also includes in IC
(IA) as an unseen, unreal, and immeasurable being. The awareness of
the management to implement Mato-based profit-sharing system from
which zakat (charity) is allocated has been evidence of faith that
the OSPC also contributes to VA creation. In fact, regardless of
the reasons, there has been the universal belief that the VA is not
only created from HC, SC, CC, PRC, and CEE, but also is gifted by
God and supported by social environment: secure country, stable
socio-political condition, natural contribution. The natural
contribution of VA can be apparent from the impact of industrial
activities that definitely cause natural destruction. In this
sense, the nature also sacrifices and contributes. In the context
of
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restaurant business for example there has been an increase in
global warming owing to heat produced in the kitchen, or
destruction in ozone layer as to the use of Air Conditioner.
Therefore, zakat (charity) in VA with Mato-based profit-sharing
system has been the inspiration of the author to develop an
extended VAICTM applicable for companies in general. It may cover
not only companies running the values of Islam by means of zakat
(charity), but also all industries and companies under the
assumption that each of them certainly has a particular spirit
named OSPC. To meet this goal, the concept of zakat (charity) is
modified into something more common but with typical spirit. The
term of zakat (charity) capital is then replaced with spiritual
capital. Pulic (2004) revealed that VAICTM is the sum of three
elements: HC, SC and CEE, and formulated as VAICTM = HC + SC + CEE.
The concept and measurement of VAICTM are developed by the Author
into Value Added Spiritual Capital Coefficient (VASCC) that
includes Organizational Spiritual Capital Efficiency (OSPCE)
element, therefore here comes the formula: VASCC = OSPCEC + VAICTM
OSPCEC = Organizational Spiritual Capital Efficiency Coefficient
VASCC = Value Added Spiritual Capital Coefficient The formula is
completely written as follows: VASCC = OSPCE + HCE + SCE + CEE
OSPCEC = VA/OSPC VA=Value Added OSPC=Spiritual Capital An Attempt
to Measure Contribution of Each IC Element to VA Creation
Since the business processes of the companies are not typical,
it is highly possible that the contribution of each IC element to
creating VA also remains distinctive. It means that this
measurement will not result exactly the same on the contribution
made by one company and the others. The concept of conventional, VA
noted by Bontis et al (2000), Pulic (2000, 2004), Choong (2008) has
not yet measured how much the contribution of each IC (HC, SC) and
CE is for the creation of the company’s VA. Could the measurement
be possible to conduct? To answer this question, the Author will
somehow re-deepen the practice of Mato-based profit-sharing system
(Hanif et al., 2015). Value Added Statement described on Exhibit 1
states that VA after tax will be distributed to the parties who
have created the VA having proportion (load) based on each profit
sharing, called Mato score. Mato score is proportional in nature
and is in line with VA profit sharing (Hanif et al., 2015; Hanif et
al., 2018; Hanif et al., 2019). It can be illustrated, for example,
in a management practice of one Padang Restaurant in Jakarta. There
are three parties involved in the establishment of the business:
(1) investors (2) management and brand owners at once (3)
employees. The profit sharing upon VA applied as norm in the
restaurant is the ratio of Mato score to all employees, to
investors, to management and brand owners that is 10:7:3 (Hanif et
al., 2019). The calculation can be easily performed by assuming the
total Mato score for all employees = 100 Mato (details will follow
in Section 4.2.). Based on the ratio, the total Mato of the company
derived is 200 Mato and the details are shown in Exhibit 2.
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Exhibit 2. Distribution of Mato Score
Total Mato Score for All Employees 100 Mato (Point)
Total Mato Score for Investors 70 Mato (Point)
Total Mato Score for Management and Brand Owner 30 Mato
(Point)
Total Mato Score 200 Mato (Point)
Referring to Mato score ratio read on Exhibit 2, the value-added
distribution can be calculated on Exhibit 3.
Hanif et al (2015)
The profit-sharing proportion is based on the Mato score load of
each party in a proportional manner. This proportion also reflects
the contribution of each VASC element that creates VA. On Exhibit
3, there are five groups of VA distribution: (1) Zakat (charity)
which is replaced with Corporate Social Responsibility (CSR)
terminology
and distributed as much as 2.50%. It is the VA created by Social
Capital (SC) to which the socio-cultural aspect contributes.
In the restaurant business, each respective VASC element can be
summarized as follows in order to create the VA.
(2) “Depreciation”, which is distributed to Investors as much as
9.75%. It is the contribution upon the investment of production
equipment in order to create the
VA. As much as 9.75% is distributed to the investors who have
provided the equipment. The portion distributed is picked from the
VA created by Capital Employee (CE).
(3) Profit Sharing, which is distributed to all Employees as
much as 43.88%. It reflects the contribution of all employees to VA
creation. The contribution of each
employee will be elaborated in EHCE section. (4) Profit Sharing,
which is distributed to Investors as much as 30.71%. Investors are
parties who support the funding of all investment in the
restaurant. This
reflects the contribution of investment in addition to
production equipment to generating VA. It, together with point (2),
belongs to CE element.
(5) Profit Sharing, which is distributed to Management and Brand
Owners as much as 13.16%. The distribution is shared to the
management, who creates the operating system and
business process, plans, executes the plan, controls, fosters,
and the Brand Owners of “Padang Restaurant”. They belong to
Structural Capital/SC.
In Exhibit 4 there is the proportion of VASC creating element on
the basis of the Mato system is formulated as follows OSPC: CE: HC:
SC = 2,50%: 40,46% : 43,88% : 13, 16%.
Exhibit 3. Value Added Distribution to Stakeholders:
Value Added (Profit), after tax, prepared to distribute X
100%
Reduced : Zakat (Charity) or Corporate Social Responsibility X
2,50% …..(1)
Value Added After Zakat (Charity) X 97,50%
Reduced: "Depreciation Distributed to Investors, 10% x 97,50% X
9,75% …..(2)
X 87,75%
======
Profit Sharing Distributed:
To All Employees, 100/200 x 87, 75% 0,43875 43,88% …..(3)
To Investors, 70/200 x 87,75% 0,307125 30,71% …..(4)
To Management and Brand Owner 30/200 x 87,75% 0,131625 13,16%
…..(5)
87,75%
Based on Mato Score ======
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Can this proportion inspire the measurement of VA creating
element proportion of other organizations and companies? Certainly,
it can be applied on one condition, that this is not a standardized
proportion which all kinds of industries and companies may use. The
proportion of OSPC, CE HC and SC to create VASCC can vary in
accordance with the respective business process uniqueness of the
industries and companies. VASCC Qualitative Aspect
Learning curve of Padang Restaurant management shows that the
distribution of zakat (charity) is only 2.5% of the VA. This
percentage does not only represent the amount reduced, but also
something more on qualitative aspect. Zakat (charity) is symbolized
as a business “guard” to maintain its long-term sustainability. It
is a symbol of spiritual values the company has. A company is
established not only for creating economic performance, but also a
journey heading to the blessing of God. These values are embedded
in Organizational Spiritual Capital (OSPC) and function to guard or
protect how the business is supposed to run as a whole. OSPC
becomes qualitatively prominent as OSPC has been the “soul” of the
organization. Therefore, these five VASC creating elements are
described as a triangular base pyramid, of which bases are three
VASC elements i.e. CE, SC, and HC. The OSPC ranks on the top
pyramid and becomes the “soul” of the complete capital existing in
the organization as seen in Figure 1.
Figure 1. Model of Extended VAIC
Exhibit 4. Distributed VASC, after tax, consists of :
(1) Zakat (Charity) or Organizational Spiritual Capital (OSPC)
2,50%
(2) Capital Employee(CE) …(2) + (4) 40,46%
(3) Human Capital (HC) 43,88%
(4) Structural Capital (SC) 13,16%
TOTAL VASC AFTER TAX 100,00%
======
4. Human
Capital (HC)
3. Structural Capital (SC)
3. Mobile &
Orchestra Capital
(MOC)
4. Marketing Capital (MC)
1.Organizational Spiritual
Capital (OSPC)
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Mobile and Orchestra Capital (MOC) are company’s wealth to
utilize the technology of industrial revolution 4.0 or industrial
revolution 5.0 by utilizing the changing business environment such
as the use of internet, AI, etc. Amazon.com, alibaba.com are
examples of companies having high MOC and being able to utilize the
industrial revolution 4.0. and industrial revolution 5.0 from which
they also create their wealth. Why SC is included in independent IC
stems from Zohar (2010) perspective, suggesting that a company
would maintain its long-term sustainability if it possibly
developed spiritual capital either in individual or organizational
level. Neubert et al (2017) added that spiritual capital is an
individual or organizational ability to deeply comprehend company’s
existence. The most striking and interesting perspective of his is
that spiritual capital is neither meant to be anti-material being,
nor anti-capitalism; instead, it’s final output is to increase
company’s strength mentally so that the company is capable to gain
profit by multiplying its wealth. Spiritual capital is situated at
the peak of the pyramid indicating that the spiritual capital
through spiritual intelligence can lead to value creation. Zohar
(2010) asserts that the existence of a company is to make profit,
but this achievement by considering long-term sustainability cannot
merely rely on material aspect – which somewhat might trap the
company into making short-term profitability and neglecting
long-term interest. This may even be worsened with the company’s
capability to only fulfil its short-term necessities because it may
eventually come to a point of destruction. Extended Human Capital
Efficiency (EHCE)
It has been clearly explained that HC is IC or IA element. Pulic
(2000, 2004) and Bontis et al (2000) claimed that HCE could be
calculated from monetary value of the total value added generated
within one period of time divided by monetary value of HC expenses
within the same period; therefore, it is formulated into VA/HC. It
means that the higher ratio attained, the better efficiency level
of HC, and vice versa. Unfortunately, this HC efficiency level,
which is placed as an object of efficiency, will be too tempting
for the company management to have HCE increased particularly under
the stagnant value of VA throughout the periods. In consequence,
the HC monetary value should be the target to reduce. It means that
the welfare and cost on development will be eliminated. It can be
summed up that HC efficiency is likely to be met, but HC
effectiveness is not (Pirzada, 2019). This can in fact decrease
employee work motivation in long-term period so that the goal
congruence will go far beyond the company unless such increase of
HCE value does not take place. There should be improvement and
development in measuring HCE required for improving the weakness of
VA/HC ratio. The measurement has to be useful for portraying
employee work productivity, effectiveness and efficiency
achievement in order that the goal congruence can be met at the
same period. HCE development is performed by re-interpreting the
concept of the VA using Mato-based profit-sharing system that
places HC in a strategic position in the company, as a partner in
adjacent with other stakeholders, under profit sharing concept with
VA proportion distributed as shown on Exhibit 6. According to HCE
concept of Pulic (2000, 2004) and Bontis et al (2000) stating that
HCE = VA/HC, HCE of a company can directly be calculated: VA/HC =
VA/0, 4388VA = 2.28. The ratio of 2.28 means that each 1 USD of
expense on HC will contribute to the company’s VA as much as 2.28
USD. Unfortunately, the ratio in the concept of the VA using this
Mato system cannot be applicable to measure HC efficiency
achievement for the ratio of VA/HC in such concept has been fixed
with approximately 2.28. Thus, the concept in VA with Mato profit
sharing system turns out to be the concept of EHCE (Extended Human
Capital Efficiency), and followed as well with a complete change of
HC efficiency measure, which is no longer based on a formula of
VA/HC but Income per Mato (IPM).
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Income per Mato
Human capital efficiency in VA, conventional concept differs
from that of Mato-based profit-sharing system. When the former
calculates it by VA/HC, the latter calculates the human capital
efficiency by focusing more on the effort performed to measure each
employee’s contribution toward the value-added creation using Mato
score. The more Mato score the employees have, the more
contribution they have made to create the VA. IPM is the proxy of
EHCE. To depict EHCE with IPM proxy, the Mato score of each
employee in the company (Padang Restaurant in this case) should
first be counted. For instance, a Padang Restaurant franchise with
38 employees of varied position has a 100 total Mato score as seen
in Table 1.
Hanif et al (2015)
Mato score reflects the employees’ contribution to the VA
creation of the company. It signifies that Mato score is
proportionally in line with the contribution to the company’s VA.
For example, let us see the Mato score of employees #2, the Head
Chef (1 person), who has “6” Mato score. Another is employee #17,
the “Kitchen Staff” (1 person) who has “2” Mato score. This means
that the contribution of “Head Chef” is three times as much as the
“Kitchen Staff” (6/2). Continued with the rest, the contribution of
each employee is comparable in the VA creation. The measurement
system of each employee’s Mato score is the most strategic activity
and has to be professionally and accurately executed by internal
management of the company.
Number PositionMato
ScoreNumber Position
Mato
Score
1 1 Person Head of Restaurant 6 20 1 Person Waiter 2
2 1 Person Head Chef 5,5 21 1 Person Waiter 2
3 1 Person Vice Head/Head Cashier 5 22 1 Person Waiter 2
4 1 Person Head Paluang 4,5 23 1 Person Waiter 2
5 1 Person Head of Service Section 4,25 24 1 Person Waiter 2
6 1 Person Waiter 4 25 1 Person Waiter 2
7 1 Person Waiter 3,75 26 1 Person Personnel of Noodle 2
8 1 Person Paluang Member 3,25 27 1 Person Personnel of Noodle
2
9 1 Person Waiter 3,25 28 1 Person Cashier Member 1,75
10 1 Person Waiter 3,25 29 1 Person Waiter 1,75
11 1 Person Head of Beverage 3 30 1 Person Waiter 1,75
12 1 Person Waiter 2,75 31 1 Person Personnel of Noodle 1,75
13 1 Person Waiter 2,75 32 1 Person Personnel of Noodle 1,75
14 1 Person Waiter 2,75 33 1 Person Personnel of Noodle 1,75
15 1 Person Kitchen Personnel 2,5 34 1 Person Dish &
Cleaning Sevice Personnel 1,75
16 1 Person Paluang Member 2,25 35 1 Person Dish & Cleaning
Sevice Personnel 1,75
17 1 Person Kitchen Personnel 2 36 1 Person Dish & Cleaning
Sevice Personnel 1,75
18 1 Person Kitchen Personnel 2 37 1 Person Dish & Cleaning
Sevice Personnel 1,5
19 1 Person Kitchen Personnel 2 38 1 Person Dish & Cleaning
Sevice Personnel 1,5
38 persons Number of Mato Score 100
Table 1. Mato Score Distributio of Padang Restaurant in Jakarta
- Indonesia
Number of
Employee
Number of
Employee
Number of Employee
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Some parties are involved in this Mato score measurement i.e.
Owner-Director, Management Accountant, Operating Manager, and Human
Resource Manager. Having determined the Mato score accordingly seen
n Table 1, the management proceeds to distribute the VA portion to
the stakeholders by referring to Exhibit 4. In this case, HC
specifically has the right to claim as much as 43.88% of the total
created VA (profit), called VA for HC (VAHC). Then, IPM can be
calculated by dividing VAHC with a total Mato score formulated as
follows: Income per Mato (IPM) = VAHC / Total Mato IPM is the
monetary value of VA per Mato that reflects employee effectiveness,
efficiency, and productivity as well as productivity and financial
performance measure of the company. In addition, IPM is the meeting
point of achieving the interests of all stakeholders. Unlike ratio
of VA/HC, higher VA does not positively reflect goal congruence
achievement. In reverse, higher IPM surely proves better
productivity, effectiveness and efficiency of HC as well as goal
congruence achievement level. The concept of EHCE and HCE are
compared briefly in Table 2.
Table 2. Compare EHCE with HCE Measurement
EHCE HCE
VA = OUT – IN
VA = HC + SC
HC = VA – SC
EHCE= VAHC / Total Mato Score
EHCE = VAHC Per Mato Score
(abbreviated “VAPM”)
VA = OUT – IN
VA = HC + SC
HCE = VA/HC
VAPM Performance Measurement
For example, PT. ABC (imaginary title) has three business units:
Business Unit A, Business Unit B, and Business Unit C with
respective data on employees and Mato score as seen on Table 3.
Firstly, out of three business units, PT ABC has, the number of
employees is classified into the smallest (6 employees), but it
might have the most Mato (36). Thus, HC resource is measured by the
number of Mato, instead of the employees under the assumption that
the measurement of each employee’s Mato has been accurately
conducted by the accounting information system by PT ABC management
on the basis of criteria that can be scientifically reliable. It
means that the employees’ Mato in each working unit is the apples
to apples. Similarly described between business unit A and business
unit B, the number of Mato they have is equal, 35 Mato, despite the
fact that business unit B has a greater number of employees (8)
than that of business unit A (7). Secondly, having had the Mato
score figured out, the contribution of each employee to generate
value added can also be investigated. For instance, if “employee D”
has 4 Mato score in business unit A, his contribution to create
value added will be half of “employee A”, or the contribution of
“employee D” is four thirty fifth of the total employees in the
unit. Thirdly, it has been previously clarified that VAPM is the
effectiveness, efficiency, and productivity measurement of the
employees and the company at once. Assumed that each value added
human capital (VAHC) of business unit A is 1,400,000 USD, of
business unit B is 700,000 USD, and of business unit C is 1,400,000
USD.
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Table 3. Mato Score of Each Employee for One Business Unit
Business Unit A Business Unit B Business Unit C
employee A, 8 Mato
employee B, 10 Mato
employee C, 5 Mato
employee D, 4 Mato
employee E, 2 Mato
employee F, 3 Mato
employee G, 3 Mato
----------------------------
7 employee, 35 Mato
VAHC = 1,40,.000 USD
thus,
VAPM=1,400,000/35
VAPM=40,000 USD
employee A, 7 Mato
employee B, 8 Mato
employee C, 5 Mato
employee D, 4 Mato
employee E, 2 Mato
employee F, 3 Mato
employee G, 3 Mato
employee H, 3 Mato
----------------------------
8 employees, 35 Mato
VAHC = 700,000 USD
thus, VAPM=700,000/35
VAPM=20,000 USD
employee A, 9 Mato
employee B, 10 Mato
employee C, 6 Mato
employee D, 5 Mato
employee E, 3 Mato
employee F, 3 Mato
----------------------------
6 employees, 36 Mato
VAHC = 1,400,000 USD
thus,
VAPM=1,400,000/36
VAPM=38,889 USD
The VAPM of each unit can then be formulated as follows: VAPM =
VAHC/Mato Score Total Thus, VAPM of business unit A is the highest
(40,000 USD) compared to that of business unit B (20,000 USD) and
of business unit C (38,389 USD). It can be concluded that business
unit A has the highest productivity and performance of the employee
and the company at once. Final result of VASC To have “HCE” been
developed into EHCE, than VASCC becomes VASCC = EHCE + SCE + CEE +
OSPCE VASCC = value added spiritual capital coefficient EHCE =
extended human capital efficiency SCE = Structural capital
efficiency CEE = Capital employee efficiency OSPCE = Organizational
spiritual capital efficiency
Conclusion
Value Added Spiritual Capital Coefficient (VASCC) is in essence
a refinement and development of VAICTM. VASCC is a comprehensive
financial work performance on the basis of value added used to
measure financial performance of a company with “current business”
property. A management accounting approach is employed to develop
VASCC measurement by integrating organizational spirituality
element. EHCE, which is one element of VASCC, is next developed by
measuring the contribution each employee makes to create company’s
VA. Consequently, an extra work should be taken into account by
internal management to identify, to evaluate, and to measure
relatively accurate contribution. Firstly, it is by determining the
HC value of the company. Secondly, it is by determining each
employee’s Mato score in the contribution to the value-added
creation of the company. Mato score can be adopted from that
implemented in Padang Restaurant management called the Mato
system.
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Acknowledgements: This research was supported by the project,
which has received funding from Ministry of
Research, Technology and Higher Education of the Republic of
Indonesia. Agreement Number: 44/AKM/MONOPNT/2019.
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